(6)

Share-Based Compensation

The Company maintains a share-based compensation plan, the 2010 Employee, Director and Consultant Equity Incentive Plan, as amended (the “2010 Plan”), that has been approved by the Company’s shareholders. The 2010 Plan allows the Company, under the direction of the Compensation Committee of the Board of Directors, to make grants of stock options, restricted and unrestricted stock awards and other stock-based awards to employees, consultants and directors. On December 5, 2013, the shareholders approved an amendment to the 2010 Plan to set the number of shares available for grant to 3,500,000. As of June 30, 2014, a total of 3,757,381 shares of common stock are reserved for issuance under the 2010 Plan. In addition, as of June 30, 2014, the Company may grant up to 5,005,532 additional shares under the 2010 Plan if options previously granted under the Company’s terminated 2003 Employee, Director and Consultant Option Plan are cancelled or expire in the future without the issuance of shares of common stock by the Company. The exercise price of options granted in 2014, 2013 and 2012 was equivalent to the fair market value of the stock at the date of grant. The number of shares, terms, and vesting periods are determined by the Company’s board of directors or a committee thereof on an option-by-option basis. Options generally vest ratably over service periods of four years. Options granted after December 5, 2012 expire eight years from the date of grant, and options granted prior to that date generally expire ten years from the date of grant.

The fair value of each option grant is estimated on the date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions used for grants for the fiscal year ended June 30:


	2014	2013	2012
Risk-free interest rate	1.6%	0.8%	1.0%
Expected dividend yield	0%	0%	0%
Expected lives (in years)	4.1 - 4.7	4.2 - 4.7	4.2 - 4.6
Expected volatility	40%	44%	44%

Expected option lives and volatilities are based on historical data of the Company and other factors.

A summary of activity is as follows:


	2014					2013					2012
	Number of shares			Weighted average exercise price		Number of shares			Weighted average exercise price		Number of shares			Weighted average exercise price
Options outstanding at beginning of year		14,434,970			21.75		15,233,281		$	19.32		14,453,913		$	18.22
Options granted		3,320,553			26.52		2,957,623			27.09		3,188,160			20.42
Less:
Options exercised		(3,122,427	)		19.44		(3,490,495	)		15.65		(1,852,245	)		11.94
Options canceled or expired		(394,913	)		24.30		(265,439	)		22.26		(556,547	)		21.48

Options outstanding at end of year		14,238,183			23.30		14,434,970			21.75		15,233,281			19.32

Options exercisable at end of year		7,149,155			21.90		7,480,472			20.51		8,397,678			18.01
Options vested and expected to vest		13,374,736			23.12		13,543,852			21.58		14,514,637			19.28
Weighted average fair value of options granted during the year					10.04					9.87					7.47

The following table summarizes information about stock options outstanding at June 30, 2014:


	Options outstanding						Options exercisable
Range of exercise prices	Number outstanding at June 30, 2014		Weighted average remaining contractual life (years)		Weighted average exercise price		Number exercisable at June 30, 2014		Weighted average exercise price
$5.89 - 19.47		4,750,203		5.85	$	17.20		3,103,525	$	16.44
20.01 - 26.49		5,531,296		6.55		25.03		2,064,390		23.14
26.84 - 30.34		3,929,684		7.09		28.16		1,975,740		29.17
30.53 - 37.73		27,000		7.18		34.05		5,500		31.11

		14,238,183		6.47				7,149,155		21.90

Options exercisable at June 30, 2014 had a weighted average remaining contractual life of 5.56 years.

Share-based compensation expense recognized and included in the consolidated statements of comprehensive income for the fiscal years ended June 30, 2014, 2013 and 2012 was as follows:


	Years Ended June 30,
(In thousands)	2014		2013		2012
Cost of molecular diagnostic testing	$	833	$	1,030	$	1,158
Cost of pharmaceutical and clinical services		317		219		85
Research and development expense		5,429		3,246		3,350
Selling, general, and administrative expense		27,418		22,117		21,682

Total share-based compensation expense	$	33,997	$	26,612	$	26,275

Total stock-based compensation for the year ended June 30, 2014 included $0.2 million, $2.0 million and $4.7 million in cost of molecular diagnostic testing, research and development and selling, general and administrative expenses, respectively, related to the acceleration of unvested stock options in connection with the acquisition of Crescendo which closed in February 2014 (see Note 12).

The Company has unrecognized share-based compensation cost related to share-based compensation granted under its current plans. The estimated unrecognized share-based compensation cost and related weighted average recognition period, aggregate intrinsic value of options outstanding, and aggregate intrinsic value of options that are fully vested is as follows:


(In thousands)	As of June 30, 2014
Unrecognized share-based compensation cost	$	41,728
Aggregate intrinsic value of options outstanding	$	222,451
Aggregate intrinsic value of options fully vested	$	121,659

The estimated unrecognized share-based compensation cost will be recognized over a weighted-average period of 2.3 years.

The total intrinsic value of options exercised during 2014, 2013 and 2012 was as follows:


	Years Ended June 30,
(In thousands)	2014		2013		2012
Total intrinsic value of options exercised	$	49,379	$	51,785	$	21,575

The Company had an Employee Stock Purchase Plan that was approved by shareholders in 1995 (the “1995 Purchase Plan”), and subsequently amended, under which 2,000,000 shares of common stock had been authorized. As of December 5, 2012, a total of 1,990,000 shares of common stock had been issued under the 1995 Purchase Plan when it was terminated. On December 5, 2012, following shareholder approval, the Company adopted the 2012 Employee Stock Purchase Plan (the “2012 Purchase Plan”), under which 2,000,000 shares of common stock have been authorized. Shares are issued under the 2012 Purchase Plan twice yearly at the end of each offering period. At June 30, 2014, a total of 169,000 shares of common stock had been purchased under the 2012 Plan. Shares purchased under and compensation expense associated with the 1995 and 2012 Plans for the years reported are as follows:


	Years Ended June 30,
(In thousands)	2014		2013		2012
Shares purchased under the Plans		169		149		161
Plan compensation expense	$	1,317	$	885	$	892

The fair value of shares issued under the Plan that was in effect for each period reported was calculated using the Black-Scholes option-pricing model using the following weighted-average assumptions:


	2014			2013			2012
Risk-free interest rate		0.1	%		0.1	%		0.1	%
Expected dividend yield		0	%		0	%		0	%
Expected lives (in years)		0.5			0.5			0.5
Expected volatility		56	%		37	%		30	%